Weekly Market Update – August 8, 2025

Quick Takes

• The S&P 500 was up +2.4% for the first full week of August, its best week since June 27, leaving it just a third of a point away from its July 28 record closing high. The tech-heavy Nasdaq was up +3.9% and achieved a fresh record high on Friday to close the week.
• The CBOE Volatility Index (VIX) dropped to 15.2, marking its biggest weekly percent decline since November, exactly four months after spiking to 52.3 on April 8 following the “Liberation Day” announcement of reciprocal tariffs.  
• The ISM Services PMI just barely remained in expansion territory in July at 50.1%, as new orders fell, and the prices sub-index rose to its highest level since October 2022. But the competing S&P Global U.S. Services PMI continued to expand in July, hitting a 7-month high.

Source: Bloomberg. Data as of August 8, 2025.
Price Returns for Equity, Total Returns for Bonds.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.

Stocks return to rally mode; bonds were little changed

As summer wraps up, the stock market appears to be making the rounds on the roller coaster. Three weeks ago, the S&P 500 Index had a perfect week with five successive days of new all-time highs. Then the following week, the S&P closed lower than it opened on every single day. And last week, stocks alternated between higher and lower each day. Fortunately, each of those winning days were larger than the down days, giving the S&P a healthy gain of +2.4% for the first full week of August – its best week since June 27. It marks the third positive week in the last four for the benchmark U.S. index and leaves it just about a third of a point away from its July 28 record closing high. The CBOE Volatility Index (VIX) dropped to 15.15, marking its biggest weekly percent decline since November, exactly four months after spiking to 52.33 on April 8 following the “Liberation Day” announcement of reciprocal tariffs.

Small cap stocks weren’t far behind as the Russell 2000 Index hit +2.4%, its best week since July 4. But it was the technology-driven Nasdaq Composite Index that really shined last week. It gained +3.9%, its best week since June 27, and closed at a fresh all-time high. Apple, the third largest member of the index at about a 9% weight, soared +5.0% on Wednesday, another +3.2% on Thursday, and then +4.2% on Friday, to finish the week up +13.3%, its best week since July 2020. On Wednesday, in an Oval Office event, the iPhone-maker confirmed a new $100B U.S. investment on top of a previous $500B pledge, in a move that many analysts said will help it avoid any tariff impacts. Last week, President Trump said he was planning to slap 100% tariffs on semiconductor imports but vowed broad exemptions to the levies for companies that are investing heavily in U.S. production facilities. CEO Tim Cook used the occasion to tout the company’s “American Manufacturing Program,” a part of the new $100B in commitments, that he said would “bring even more jobs and advanced manufacturing to the U.S.” — 450,000 jobs with suppliers and partners in all 50 states, and manufacturing at 79 U.S. factories.

Regarding tariffs, President Trump’s reciprocal tariffs announced on Liberation Day finally went into effect on Thursday last week after being pushed back twice since April. Other tariff-related headlines included news that tariffs on Indian goods would be doubled to 50% as a punishment for the country’s purchase of Russian oil, as well as reports that U.S. negotiations with Switzerland ended without reaching a deal, leaving levies on Swiss imports at 39%. U.S. Commerce Secretary Howard Lutnick said Thursday that the U.S. is likely to extend the trade truce with China for another 90 days.

U.S. Treasury yields drifted higher across most maturities, with the yield on the benchmark 10-year U.S. Treasury note rising +7 basis points for the week, to end at 4.28%. With yields slightly higher, U.S. bonds were slightly lower (bond prices and yields move in opposite directions). The total return for the Bloomberg U.S. Aggregate Bond Index was -0.2% for the week. Non-U.S. bond returns were able to eke out a gain, however, as the Bloomberg Global Aggregate ex U.S. Bond Index returned +0.8%, offsetting the prior week’s loss.

Chart of the Week

The ISM Services PMI just barely remained in expansion territory in July at 50.1%, down from an unrevised 50.8% in June (50% is the demarcation between economic expansion and contraction). That result was below Wall Street consensus expectations for a rise to 51.5%. Service-oriented companies, such as restaurants and retailers, employ the majority of Americans. The New Orders component fell to 50.3% from 51.3% and the Business Activity/Production component declined to 52.6% from 54.2%. The Employment component also declined, to 46.4% from 47.2%, the fourth time in five months it’s been in contraction territory. Also concerning is that the Prices sub-index rose to 69.9% from 67.5%. As shown below, that is the highest level since October 2022 and its eighth straight month above 60. On the positive side, the Supplier Deliveries index jumped to 51.0% from 50.3% while the Backlog of Orders index increased to 44.3% from 42.4%. Still, overall, the report showed an undesirable mix of slowing growth yet rising prices.

ISM Services Index Shows ‘Worrisome’ Price Rise

ISM Services PMI, Prices sub-index

Source: Institute for Supply Management (ISM), LSEG, The Wall Street Journal.

The Week Ahead

This week will be fairly light again, especially to start the week. No major reports are scheduled for Monday. On Tuesday, the National Federation of Independent Business (NFIB) reports their Index of Small Business Optimism for June. But the bigger focus will be on the Bureau of Labor Statistics (BLS) release of the Consumer Price Index (CPI) for July. Later that afternoon, the Federal Budget Balance is reported. Wednesday is slow with just the regular weekly MBA Mortgage Applications report. On Thursday, the BLS gives us a look at wholesale inflation with the Producer Price Index (PPI), along with the usual weekly U.S. Initial Jobless Claims from the Department of Labor. Friday is the busiest day of the week with more inflation data from the release of Import and Export Prices. A glimpse into the consumer will come with the advance report on Retail Sales for July from the Census Bureau, as well as the University of Michigan’s Consumer Sentiment survey for August. 

Earnings season is finally winding down, with Barrick Mining and Oklo reporting quarterly results on Monday, followed by Cardinal Health, Cava Group, CoreWeave, Madison Square Garden Sports, On Holding, and Rigetti Computing on Tuesday. Cisco Systems, Coherent, and Venture Global results are due out Wednesday. Thursday’s earnings lineup includes Applied Materials, Deere, JD.com, NetEase, Nu Holdings, and Tapestry.

Did You Know?

CASH WINDFALL – A cash windfall from President Trump’s Tax Law is expected to show up at America’s biggest companies. Changes like allowing upfront depreciation of assets and immediate expensing of research-and-development expenses will bring swift windfalls to American corporations in the current fiscal year. Alphabet and Amazon are expected to save $15 to $17 billion, and Microsoft and Meta Platforms (Facebook) are forecast to save $10 to $12 billion. (Source: The Wall Street Journal)

SCHWAB SEES MUTED SENTIMENT – Last week, Schwab updated their Schwab Trading Activity Index monthly sentiment gauge. Unlike other sentiment surveys, which directly ask whether investors are bullish or bearish, this index tracks actual activity in retail investor accounts to calculate sentiment. The July reading ticked up to 41.8 versus 40.7 the month prior. That remains a muted reading relative to its history, including prior to 2019 when it was the TD Ameritrade Investor Movement Index prior to the two companies’ merger. (Source: Bespoke)

THE TREND IS NOT YOUR FRIEND – The average Trend-following hedge fund return in the first half of this year is -9.6%, on track for their worst annual performance since at least 1998. Known as trend followers, the fast-moving quantitative funds that use complicated algorithms to spot patterns in asset prices and then ride them up or down are meant to flourish in tough markets. But with the tariff-induced choppy markets of 2025, they’re struggling. (Source: PivotalPath, The Wall Street Journal)

This Week in History

INFLATION FIGHTER – On August 6, 1979, Paul Volcker took office as chair of the Federal Reserve. His policies broke the back of 1970s inflation but spurred two recessions. (Source: The Wall Street Journal)

Economic Review

• Unlike the competing ISM Services PMI, the S&P Global U.S. Services PMI continued to expand in July, hitting a seven-month high of 55.7, up from 52.9 in June, and slightly above expectations for 55.2, which was the preliminary flash estimate two weeks ago. New Orders expanded for the fifteenth consecutive month and at the fastest since January. But New Export Orders fell further as tariffs – and government policy-related factors – continued to negatively impact inflows of new business from abroad. New export orders have now decreased in each of the past four months, although the latest reduction was only marginal and the slowest in this sequence. Tariffs also had a clear impact on Prices, according to anecdotal evidence. Companies widely linked the latest increase in Input Costs to the effects of tariffs, while also mentioning higher salaries. Input prices rose sharply, with the pace of inflation accelerating from June. Similarly, the pace of Selling Prices quickened to steep levels. Panelists reported passing on tariff-related rises in input costs to their customers. Here too, the increase was marked in the context of historical data. With New Orders increasing solidly, pressure came on operating capacity in July. Backlogs of work accumulated for the fifth consecutive month, and at a solid pace that was the fastest since May 2022. Companies responded to rising workloads by taking on extra staff, the fifth month running in which this has been the case. The pace of job creation remained only modest, however. Looking to the future, companies remained optimistic that business activity will increase over the coming year, but that optimism eased to a three-month low.
• The Commerce Department reported that Factory Orders slumped -4.8% in June, matching expectations, but down sharply from +8.3% the prior month (revised up from +8.2%). Factory Orders Ex Transportation were up +0.4%, exceeding expectations for a +0.3% rise and matching the prior month after it was revised up from +0.2%. Durable Goods Orders for long-lasting items such as televisions, appliances, and transportation equipment sank -9.4%, just short of expectations for -9.3%, which was the advance reading, and down from +16.5% the prior month. Durable Goods Orders Excluding Transportation were up +0.2%, as expected, and matching the advanced reading two weeks earlier, but down from +0.6% the prior month. The important Core Capital Goods Orders (capital goods excluding volatile sectors like transportation and defense), a proxy for business spending, were down -0.8% versus the advance reading of -0.7% and +1.9% the prior month. Core Capital Goods Shipments, which are factored into GDP, were up +0.3% versus the advance reading of +0.4% and the prior month’s +0.4% rise.  The inventory-to-shipments ratio held steady at 1.57. The bottom line is that most of the weakness in June was primarily from transportation, and ex-transportation wasn’t a bad report.
• Outstanding U.S. Consumer Credit increased by +$7.37 billion in June, just shy of expectations for +$7.50 billion, but up from $5.129 the prior month (revised up from the initially reported +$5.102 billion). That amounts to a +1.8% annual growth rate for the month, up from the +1.2% annualized growth rate the prior month. Growth for revolving credit, such as credit cards, fell at a -1.1% rate, up from the prior month’s -3.2% rate. Nonrevolving credit, which tends to be much less volatile than revolving credit and includes auto as well as school loans, rose at an +8.4% rate following the prior month’s +9.0% increase. The data from the Federal Reserve is not adjusted for inflation and does not include mortgage loans, which is the largest category of household debt. The takeaway from the report is that consumers are pulling back from spending. Declines from credit-card borrowing are rare; the last time revolving credit fell for two straight months was during the COVID pandemic in 2020.
• According to the U.S. Bureau of Economic Analysis, the U.S. Trade Deficit for June narrowed unexpectedly to $60.2 from $71.7 billion in May (revised from $71.5 billion). That was better than the $61.0 billion deficit expected. Smaller trade deficits help contribute to economic growth, while larger deficits inhibit growth. This significant reduction was primarily attributed to a notable decline in Imports, particularly of consumer goods and industrial supplies, possibly influenced by inventory adjustments and the anticipated effects of new tariffs. Exports also saw a slight decrease of -0.5%, or -$1.3 billion less than the prior month, while Imports were down -3.7%, or -$12.8 billion less than May. The key takeaway from the report is that while a narrower deficit can be seen positively for GDP calculations, it likely reflects that tariff actions have impeded global trade activity.
• The Census Bureau reported Wholesale Inventories ticked up +0.1% to $906.3 billion in June, just shy of expectations for a +0.2% rise. Year-over-Year (YoY) inventories were up +1.3%, down from the +1.4% annual rate the prior month. That is still well below the typical +4% to +6% annual increase in strong economies. Inventories are goods produced for sale that have not been sold yet. Wholesale Trade Sales rose +0.3% to $698.5 billion, up sharply from the prior month’s -0.4% decline (revised down from -0.3%) and above expectations for +0.1%. Wholesale inventories data isn’t adjusted for inflation. The Inventory-to-Sales Ratio was steady at 1.30 months, down from 1.35 a year earlier. The ratio reflects how long it would take a company to sell all the goods sitting on warehouse shelves.  
• Weekly MBA Mortgage Applications rose +3.1% for the week ending August 1, following a -3.8% fall the prior week. The Purchase Index was up +1.5% after falling -5.8% the prior week. The Refinance Index jumped +5.2% after a -1.1% decline the prior week. The average 30-Year Mortgage Rate slid to 6.77% from 6.83% the prior week.
• Weekly Initial Jobless Claims were up +7,000 to 226,000 for the week ending August 1, better than expectations for 222,0000. The prior week was unrevised. The number of people already collecting unemployment claims (i.e., Continuing Claims) increased +38,000 to 1,974,000 for the week ending July 25, worse than expectations for 1,950,000. The prior week’s reading was revised lower from 1,946,000.

Asset Class Performance

Source: Bloomberg.
Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange-traded funds recommended by The Retirement Planning Group. The performance of those funds may be substantially different from the performance of the broad asset classes and to proxy ETFs represented here. US Bonds (iShares Core US Aggregate Bond ETF); High‐Yield Bond (iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (Vanguard Total International Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 Value ETF); Mid Growth (iShares Russell Mid-Cap Growth ETF); Mid Value (iShares Russell Mid-Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares US Real Estate ETF). The return displayed as “Allocation” is a weighted average of the ETF proxies shown as represented by 24% US Bonds, 10% International Bonds, 6% High Yield Bonds, 13.8% Large Growth, 13.8% Large Value, 3.6% Mid Growth, 3.6% Mid Value, 1.2% Small Growth, 1.2% Small Value, 16.8% International Stock, 4.2% Emerging Markets, 1.8% Real Estate.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.